Summit Notebook

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The drug industry’s business model is unraveling after years of bankable growth. Some of the healthcare industry's most prominent executives and officials will discuss their strategies for change at the 2011 Reuters Health Summit, from May 9-12 in New York.

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A dozen Reuters reporters are covering the annual Reuters Health Summit in New York, featuring speakers from the world’s leading healthcare companies, including Pfizer, GlaxoSmithKline, Merck, Novartis, AstraZeneca, Novo Nordisk and Eli Lilly, plus top insurers and the commissioner of the Food and Drug Administration. Follow the action as it happens:

Pharmaceutical companies are striking mega deals, diversifying and cutting costs to gird for the storm of patent expirations. There are signs that the industry is becoming more productive in its research labs after an extended dry patch. But investors are not convinced they are on the path to sustained profits: pharmaceutical stocks overall have underperformed the broader market in 2009, and trade in general at low premiums.

Indeed, Wall Street skepticism persists in many corners of healthcare. The uncertainty over the outcome of U.S. health reform efforts has brought a cloud over the sector, none more so than for health insurers, which are at rock-bottom valuations. The weak economy weighs on medical technology companies, as hospital keep tight reins on budgets and people avoid elective procedures.

Some of the world’s most prominent CEOs and top executives from leading health care companies and organizations will discuss these and related issues at the Reuters Health Summit, which will generate exclusive interviews and key insights from our team of reporters as well as online video and blog postings, which will be immediately available only to Thomson Reuters clients during the Summit.

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With U.S. automakers close to collapse and financial services companies in turmoil, drug makers are positioning themselves as a premier American industry that deserves support from policymakers.
“The pharmaceutical industry is a national treasure,” Joe Pieroni, head of U.S. commercial operations for Japanese drugmaker Daiichi Sankyo, said at the Reuters Health Summit in New York.
“We are probably at the forefront of technology in terms of numbers of jobs, numbers of innovations, numbers of patents,” he added.
Drug makers are touting their contribution to the health and economy of the nation as traditionally critical Democrats prepare a major effort to overhaul health care. The companies are expected to face pressure to lower prices often attacked as too high. Manufacturers say that could hurt their ability to invest in research for new medicines.
Pharmaceutical companies are working “to convince people in Congress that, instead of bashing the industry, try to work with the industry in establishing the U.S. as truly a foundation for this high technology workforce,” Pieroni said.
Other executives who spoke to the Reuters summit also waved the flag.
“Here is a chance for the U.S. to keep doing what it is very good at, which is to innovate,” Schering-Plough Corp Chief Executive Fred Hassan said.
With the auto and computer industries, Hassan said “unfortunately a lot of that went over to Asia a long time ago. But we are the preeminent industry around the world … and this is a crown jewel of the U.S.,” Hassan said.
The health-care sector is “a very important source of jobs and innovation and economic growth,” Pfizer Chief Executive Jeff Kindler said.

Aetna CEO Ron Williams is one of the highest profile African American executives in the United States. On Wednesday he reflected on the election of Barack Obama, who is about to become the nation’s first black president.
“I thought it was terrific that the country was able to judge him on the basis of what they felt he could do for the country. I felt proud of the country. I thought it was an important milestone in the evolution of the country, and having done that, like the seat I sit in, now our shareholders want to know, ‘what are you going to do for us?’
“I think he is off to a good start working on critical issues,” said Williams.

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Big pharma mega mergers are no way to escape looming loss of exclusivity on key drugs and pressure on prices. In fact, they’re the last refuge of CEOs running out of ideas, reckons Bayer HealthCare’s chief Arthur Higgins.
“I think the tendency is, when you’re short of ideas, to go for a quick fix. It’s a little like myself and a sugar rush. I feel good for about 10 minutes, then I wish I’d never taken the sugar,” Higgins told the Reuters Health Summit. “I can’t see any logic in combining two poorly performing businesses when at the heart what keeps it sustainable is innovation. And there’s no relationship between scale and innovation.“
What’s more, the financial crisis threatens a long-held adage about the drug industry — its defensive status in a downturn — and while prices for acquisition targets may be plummeting, that does not necessarily mean the deal adds up to value.
“Traditionally healthcare has been somewhat cushioned in these economic times, but nobody knows the future any more. We all listen to the television, we all meet with experts, but this is completely outside people’s experience,” Higgins said. “I don’t think any company at the moment is looking at major acquisitions. I think we’re all going to take a pause and step back and look at the economic outlook in 2009.”

Many risk factors for developing heart disease are well known, such as smoking, obesity, high cholesterol and high blood pressure. Last week, a study suggested that elevated C-reactive protein (CRP) levels in the blood may indicate higher risk of heart disease.
AstraZeneca Chief Executive David Brennan has identified a few more risk factors and may be ready to start taking his own cholesterol medicine.
“I don’t know about you guys but I’m having my CRP tested. Why not know? I’m 55 years old, Type A personality, an executive, that’s a risk factor right there. Working in the pharmaceutical industry is a risk factor,” Brennan said, only half joking.